RISK
MANAGEMENT
19
DIRECTORS AND SENIOR MANAGEMENT
are intelligent people who are committed to their
job, but they do need a sophisticated understa nding
of many management elements, from financial
and strategic to the operating environment and
competitive landscape, and importantly, risks and
opportunities for the organisation in the short and
long ter m.
However, can they honestly claim to truly
understand the reporting they are presented with
or the risk appetite of the organisation?
Their understanding of risk management
reporting is cr ucial on several levels:
• They may not always understand the technical
detail, but they should be comfortable with
the assessment and mitigation strategies for
their key risks.
• They should also be satisﬁed that the key risks
have been accurately identified -- perhaps even
taking an active debating role, to ensure everyone
is across the organisation's strategy and objectives.
• They should be able to discer n the difference
between a risk that is quantifiable and
analysable and those that are more 'uncertain'.
• They should also recognise that operating
in an environment where the execution of
activities is dependent on hum an behaviour,
as with many areas of operational risk,
can render some of the evaluations less
quantifiable, 'provable' or certain, because of
the 'human element', and this should be taken
up in the analysis.
You may have to dispel the assumption that
part of your role is to 'manage' all of the risks or
minimise them. Some risks should be embraced,
monitored and tackled head on. Others may be
opportunities that they may want to prepare for,
to be ready to take advantage of them (should
they occur) further down the track.
It should be clear what the nuances and benefits
risk management can provide are, as well as its
limitations.
While you
understand
what they do
and what their
reports mean,
the vital question
is whether you
can be certain
that who you
report to also
understands.
Engaging board in risk
management
Of all the things a risk manager does, communicating and
reporting to the Board and senior management, and obtaining
engagement, mandate and commitment from that level, can be
one of the biggest challenges.